News

Barclays profit up 6.2pc on lending to government

bbk

Barclays Bank Kenya MD Jeremy Awori during a 2015 briefing when the lender bought the insurer. FILE PHOTO | NM

Barclays Bank of Kenya’s #ticker:BBK net profit for the six months to June grew 6.2 per cent to Sh3.76 billion on the back of increased lending to government and lower costs.

The bank grew its lending to the government by nearly a third to Sh70 billion as the legal cap on lending rates made loaning to homes and business unattractive.

It earned an additional Sh1 billion from government securities to push earnings from state bonds and bills to Sh3.52 billion.

Earnings from lending to households and business remained flat at Sh10.54 billion despite its customer loans growing 7.9 per cent to Sh176.1 billion, underlying the impact government cap on lending rates.

The cap on lending rates, introduced in September 2016, was expected to squeeze margins and profits of Kenyan banks. Most banks reported lower earnings last year, but they seem to have turned the corner this year based on half year and quarter one reports.

The cap limits commercial bank lending rates at 400 basis points above the central bank rate, which stands at 9 per cent, pricing loans at a maximum of 13 per cent

The government brought in the cap because it said lending rates were too high.

ALSO READ: How Barclays Africa can thrive as Absa

Businesses in Kenya had complained that high commercial lending rates charged by the banks had hindered corporate investment.

Economists led by the International Monetary Fund (IMF) reckon the interest rate cap risked hurting growth by discouraging lending to smaller borrowers who are deemed more risky, prompting calls for review of the loans law.

In the six months, Barclays’ operating expenses dropped six per cent to Sh3.77 billion.

Staff costs and rental charges dropped during the period reflecting the dividends of laying off 130 workers and closing seven branches last year.

It will pay an interim dividend of Sh0.20 per ordinary share.

a similar payout was made in first half of last year when its profits dipped 12 per cent.

ALSO READ: Barclays Bank launches skills building programme for SMEs